I attended our local real estate club REIN meeting in Nashville yesterday afternoon.
I thought I would take my own advice and get more active with other real estate investors, rehabbers, realtors, etc. And I’m so glad I did.
I had a great time and I learned a lot and their barbecue was certainly delicious.
One thing that impressed me was the group attending the lecture on Triple Net Leases.
Don’t ever underestimate these thinned –haired F150 drivers whose socks don’t quite reach up to the cuffs of their britches. Their brains generally operate in over-drive.
Diverse is putting it mild.
We had some old timers in there, including my soon to be 82-year-old dad, who could run circles around some of the younger investors. (You know the ones who talk on their cell phones all the time)
That’s because the old timers have been investing for many real estate cycles, up and down, and sideways, and they’ve seen it all. Or most of it anyway.
Triple Net Leases are supposed to save you a lot of grief as a commercial landlord, or so we’ve been told. Hmmm…
A commercial broker was teaching the class and she handed out some sheets on two properties for sale.
One was a brand new medical building in Centerville, TN and the other was a 30 year- old strip center in Bowling Green, KY.
She wanted to point out the checklist we should all go through before buying into such deals.
As it turned out, the older guys didn’t need a check list (although I wrote it down and I’ll put it up tomorrow in Part 2).
“Who were the big tenants who have left the shopping center?” my dad suddenly asked.
She seemed a little surprised. She hadn’t mentioned anything about any anchor tenants leaving.
Why did he want to know? Because the ones that replaced them are not that impressive. We had never heard of something called the Rugged Warehouse.
Come to discover most of the little mom and pop shops were paying the highest percentage of rent per square foot. Not a good omen.
Sratch that off at over $3 million.
Then there’s the medical building in Centerville.
“But the impeccable tenant is a major kidney dialysis company,” the commercial broker crooned.
Yeah, right. It didn’t take this savvy group long to figure out the developer had built three medical centers and he had to put this one in a kind of out –of- the- way area in order to be able to build the other two good ones. Some people refer to that as bundling a deal.
Besides, even with a Triple Net NNN Lease you can still have a lot of responsibility as a landlord.
I raised the question about being responsible for all the utilities working and all. What happens if the electricity goes out and the back-up generators go out too? You’ve got all those patients on dialysis…. Well, those are problems I just don’t want to have to deal with.
I came out of the class wiser and a little more satisfied with out residential properties. After all, shouldn’t we be counting our blessings, naming them one by one, as the old hymnal says?
To put it bluntly there’s a big difference in fixing a garbage disposal every now and then instead of dealing with such headaches as the $5 million dollars worth of environmental damage a car repair place did to a commercial property, even with a triple net lease.
Tomorrow Part 2 and the Checklist
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